The similarities between California and General Motors shouldn’t exist, let alone be compared. Two icons of American culture, one broken and the other one so badly bruised and in a state of disrepair it may never be fixed. What’s happening with the American way of life when the largest state in the nation and the once largest corporation in America pass through the Rubicon of fame to shame? It’s quite possible that both became too big to manage and any cost efficiencies that resulted were destroyed by massive overhead and an uncompetitive nature that accompanies bureaucracies out of control.
I guess John McCain was correct when he told Detroit auto workers that these jobs were not coming back.
The Mighty Have Fallen
Both California and General Motors forgot one basic principal and that is that spending has to be controlled by revenue. More cannot go out than what comes in. Assets must exceed liabilities. Multinational corporations and states with the 8th largest economy in the world do not go bankrupt overnight. There is a pattern that leads to failure, and it is typically because the hard choices and decisions cannot be made when they should, since the concerns of the few are put before the welfare of the many.
Will California Follow GM’s Path?
The comparisons that can be drawn between a public company and a state government are usually nonexistent. A public company reports to its shareholders while state government reports to no one the voters. If state government needs revenue they raise taxes, very seldom do they make budget cuts. If a public company needs more revenue they have to sell more of something or cut spending.
Blame the Unions? Management? Our Elected Officials?
Are the labor unions the primary reason that GM was uncompetitive? Did their labor rate reported at $85/hour make them uncompetitive? Did their additional vehicle cost of $4000 compared to Japanese models prohibit them from making money? Did all of the federal government restrictions mandating clean air, minimum miles per gallon along with social security taxes and corporate income taxes place to heavy a burden on the manufacturing process and ultimately the consumer? Were executive bonuses paid on performance or handed out because you were a member in the club?
And how about the great state of California. Are the labor unions with their cost of living increases along with the fat retirement programs placing an unrecoverable burden on the state’s finances? What about our elected officials who seem to abuse the perks and stick the entertainment and travel expense reimbursement back to the taxpayer. Everybody cannot be “entitled”, or maybe they can and that’s just how we got here.
What about a property tax system that punishes the new homeowner with higher taxes while your neighbor who has been there for 25 years pays 80% less than what you pay. And what about a state that thinks the way to prosperity is to tax the hell out of everything, not realizing the higher the tax the less utility something has. Those who can afford to simply refuse to play along and may decide to leave the state. What about the incentives for business to come here and provide jobs that employ people so that they can buy houses and in turn put money back into the local economy.
If Not Me, Who? If Not Now, When?
One thing everybody has is lots of questions. Its answers which are in short supply. More and more questions beget tougher answers. The next time we ask ourselves who is responsible; we should be standing in front of the mirror. If we are a government of the people, for the people and by the people I have one more question.
What happened to all of the people?
About Doug Willis
Great post Doug. I drew a strange parallel to my Navy days and what has happened to my retirement and medical benefits over the last ten years or so. Unlike CA and GM, when the revenue (in the form of the VA and Defense Department Budget) was not there, they simply changed the rules on us and had us start to pay for medical care for our dependents, then for our own unless we where at a military medical facility. Then they got rid of retiree dental. Then they started making us pay co-pays on prescriptions. The list goes on, but the point being if there was no money to pay for it, we (the military people) had to pay for it ourselves – despite the promises made. There just wasn’t any more funding. Kevlar or a wisdom tooth extraction for me or junior – pretty easy vote there. Neither the people of California, nor the workers of GM should expect too much in the days and years to come. If the money ain’t there, someone has to decide what gets paid for and what doesn’t.
Joe,
It’s shameful what our government has done to our military personnel and veterans while they continue to live the life of the elitist elected official.
What Can we common Poeple do about the Bailout? Nothing.. we just have to wait and see if the company comes up and develops new cars and prototypes to please the americal consumer
No Surprise that GM had to sink like the Titanic.. Just the pain and hard work of 300 Million Taxpayers going down the drain.. Whose responsible for that?